This archive report was first published on 10 July 2020.
Kenya's coffee farmers are facing uncertainty as new regulations governing the sector take effect. The regulations, which were gazetted in April 2020, require the Nairobi Coffee Exchange (NCE) and brokers to be licensed by the Capital Markets Authority (CMA).
However, the implementation of these regulations has been marred by confusion, with the scheduled coffee auction failing to take place on Tuesday. The auction was meant to resume after a month-long recess, but it was delayed due to lack of preparedness by players, including CMA.
The Kenya Coffee Producers Association (KCPA) has expressed concerns that the new regulations could lead to major trading disruptions and affect the earnings of farmers. KCPA chairman Peter Gikonyo stated that the auction was expected to open on July 7, but it did not take off due to existing contracts with marketing agents and released coffee.
According to Gikonyo, further delays in kick-starting the auction might result in buyers finding alternatives for their home markets, as well as prices of local coffee tanking. He has called for the suspension of the new rules until structures and systems are in place, including amendment of the Crops Act 2013 to accommodate the role of CMA in coffee trading.
CMA acting chief executive Wyckliffe Shamiah has issued transitional guidelines, allowing players to use the previous rules. However, NCE attributed the failure to have the auction as being occasioned by lack of clarity.
Shamiah stated that marketing agents would continue paying farmers through the current framework before the Direct Settlement System is in place. Currently, farmers are paid through their cooperatives.
The Capital Markets (Coffee Exchange) Regulations 2020 are part of a raft of measures being implemented to revive the coffee sector, as recommended by a task force formed in 2016.
